The unprecedented crash in global crude oil prices is putting the brakes on plans and efforts to develop the country’s next two oilfields. The situation is made worse by the fact that these two pending fields – Aker Energy’s Pecan field and Springfield Ghana’s field – are expected to be considerably more productive than the Jubilee, TEN Cluster and Sankofa Gyaname fields already in production.
Ghana produced about 214,000 barrels per day (bpd) in 2019 and this was expected to rise to 420,00 by 2023, with the Pecan field expected to contribute the most to the anticipated increase. Springfield’s impending project is still in its infant stage, but its sheer size is expected to add on at least another 150,000 bpd. The timelines for these increases are now looking increasingly unlikely.
By early this week Brent crude oil, which is similar in quality to Ghana’s crude, was trading at a long term low of just US$18 per barrel. However, Ghana’s impending next fields, like the three already in production are all located in deep water, off of Western Region, where it costs about US$30 to produce a barrel.
This means that all Ghana’s fields are currently financially unviable. But while existing fields are maintaining production to meet recurrent and debt servicing costs – albeit with field expansion projects being slowed or suspended altogether – new fields will not secure requisite financing at current prices.
Actually, Aker Energy had already secured investment commitments for its impending Pecan field (much of it from its own corporate stash), but investors will likely pull back for now. Ironically, development of the field was supposed to have started nearly a year ago, but government twice insisted on revisions to its plan of development, which have now been done, only for the price crash to make the financial projections in the PoD unrealistic for now.
The impending project by Springfield is in even murkier waters. Being an indigenous Ghanaian firm, Springfield needs both a technical partner to develop and operate its field, as well as huge financing, to develop what is expected to be one of Africa’s biggest oilfields.